Life and Critical Illness cover - Time of underwriting

sxp04rs

Hi there,

Apologies if this is in the wrong place, first time posting on the site - although we have been using it for a while.

We are in the process of buying a house for the first time. We have a mortgage broker who wants us to buy a fully protected mortgage from them, including life cover, critical illness, redundancy etc. The price quoted seemed quite high, so I have been shopping around. The broker told us that any insurance we buy online will not be underwritten until time of claim - meaning it could be rejected if anything has changed since the application.

From my research it looks as if this is not the case with the two insurers I am looking at (iProtect for redundancy and illness, Legal & General for life), both claim to be underwritten at point of sale. They also both ask for medicals at the application stage if necessary, which supports the fact they underwrite immediately.

Does anyone know whether this is correct advise from our mortgage broker, or do they just want us to buy through them?

Thanks!

dunstonh

The broker told us that any insurance we buy online will not be underwritten until time of claim - meaning it could be rejected if anything has changed since the application.

Quite possibly the case if you are not comparing like for like (mainly in income protection).

From my research it looks as if this is not the case with the two insurers I am looking at (iProtect for redundancy and illness, Legal & General for life), both claim to be underwritten at point of sale.

Life assurance is normally underwritten at point of sale. Some life insurance is not. Redundancy cover is underwritten at point of claim. Full income protection (PHI) is underwritten at point of sale. Budget income protection or payment protection as it really is (PPI) is underwritten at point of claim.

Just for clarification, the term "underwritten at point of sale/claim" is technically wrong in its wording but widely used. They all provide cover from point of sale. However, the plans that we refer to as underwritten at point of sale mean that they have asked and if necessary checked details and have offered cover based on the facts. Underwritten at point of claim means they dont ask the full details until you claim and then they tell you if you are covered or not.

ACG

It sounds to me like your broker isnt quite telling the truth.

If you go and buy life insurance online, presuming it is normal term assurance then it will most likely be underwritten prior to you taking out the policy - ie they will ask quite a lot of health related questions as opposed to a couple of very generic questions.

Dunston has pretty much summed it up. Chances are you can probably get the insurance cheaper doing it alone, but it wont be a lot cheaper it also means if you do something wrong then its on your head be it - you have no protection should it be wrong, if you do it through an advised sale then you do.
For the sake of a small difference each month its worth knowing what your paying for is going to do what you expect it to do.

Personally, i dont like it when brokers lead clients to believe something that may not be true - its not really following the whole TCF (treating customers fairly) initiative. But i would always suggest using a broker for protection unless your confident you know what your doing.

If the price is too expensive, tell your broker. Give him/her a budget - you obviously wont get the same amount of cover but knocking off small amounts of the cover so your not fully protected but say 90% might make it more affordable.

No advisor wants to sell you the earth for it then to come off risk 2 months later, so just tell them what you can afford and get them working for their money.

dunstonh

I wasnt as quick to jump on the adviser in case it is just the income protection he was referring to. If it was all insurances then I would join you wholeheartedly join you in jumping on him.

Apart from income protection, the products you can buy online are nearly the same or exactly the same as you can get from an IFA or independent mortgage adviser. Some tied agent sold insurance products are actually cut down from the IFA version. Some products "direct from provider" are also cut down from the IFA version.

The biggest areas to take care are income protection. A lot of people mix up their PHI and PPI and go with the latter. PHI is very much an IFA product and has little web coverage. PPI is preferred by comparison sites and internet sites as it is quicker to sell and earns them more. PHI is far superior to PPI (although having both can often be the ideal solution).

Another area where people going DIY make common mistakes is to mix up terminal illness cover with critical illness cover thinking they are the same thing. They are not even close. Lastly, price is not everything. Even on life assurance which can have plans with certain options and features which are removed on some budget plans. Hopefully you never want to use them but if you found out that that buying a plan that cost 50p a month more than the one you bought would pay out when the one you have wont, you would kick yourself for false economy.

kingstreet

sxp04rs wrote: »

We have a mortgage broker who wants us to buy a fully protected mortgage from them, including life cover, critical illness, redundancy etc

Not what you asked, I know, but is the adviser offering whole market or independent advice, or working from a panel or a single provider?

Check the Initial Disclosure Document you should have been given for this, and an explanation of what service the adviser offers and how he is remunerated.

Robinmsa

Hi there I've recently had a quote from Legal and General.
All in all it works out at about £125 a month.
That covers us for Critical Illness and income protection. I'm 41 and my partner is 40, it is a 20 year mortgage for 82,000.
Over the term it's over a third of the value of the mortgage, is anywhere else going to be cheaper, we are seeing our advisor later this week, oh and I have a medical condition.

dunstonh

Over the term it's over a third of the value of the mortgage, is anywhere else going to be cheaper, we are seeing our advisor later this week, oh and I have a medical condition.

Is that £125 before or after underwriting have priced it?
Is that L&G direct, L&G through an IFA or L&G via a tied agent?

Is price your primary driver or quality?

Robinmsa

It has definitely been underwritten as they refused to do it without seeing my complete medical records. It took 3 months and nothing changed lol
The agent was independant through Haybrooks estate agents, you'll have to give me a few minute on the othe part:-)

Robinmsa

Price is just a little expensive I'd like good quality at a reasonable price

lisyloo

The broker told us that any insurance we buy online will not be underwritten until time of claim

Income protection MAY be an execption but my personal experience is that when a saleman claims to know how every other company in the industry works, it's usually not true.

dunstonh

The agent was independant through Haybrooks estate agents, you'll have to give me a few minute on the othe part:-)

Are you sure? most estate agents are not independent. They may be whole of market on mortgages but tied on insurances. They not-so-good ones tend to use the whole of market on mortgages to give the impression that they are independent in all areas. L&G sales reps are frequently based in estate agent chains. If all the insurance policies are provided by one provider then chances are that is not an indication of independent advice but tied advice.